The movers and shakers of scandal-ridden Wall Street are busy scapegoating a 'few rotten apples' — and hoping the rest of us don't notice they're still holding billions in ill-gotten gains.
The banking industry had been seeking the repeal of the 1933 Glass–Steagall Act since the 1980s, if not earlier. The Gramm-Leach-Bliley Act was signed into law by President Bill Clinton in 1999 and it repealed part of the Glass–Steagall Act of 1933, opening up the market among banking companies (i.e. Goldman Sachs), securities companies (i.e Enron) and insurance companies (i.e. AIG). The Glass–Steagall Act had prohibited any one institution from acting as any combination of an investment bank, a commercial bank, and an insurance company.
Since 1999 the banking industry made many bankers billionaires and they spent
most of the first decade of the 21st century on the Forbes list of America’s
400 richest. Should a chunk of their ill-gotten fortunes now be clawed back?
We as a nation actually answered questions just like these generations ago. In 1916, we enacted a federal estate tax, a national levy on the grand fortunes that affluent people leave behind at death.
Back then, most Americans agreed that the richest among us had either ripped the rest of us off to build up their grand fortunes or benefited much too royally from an infrastructure the rest of us, through our tax dollars, had fashioned.
Either way, our forebears concluded, the wealthy had a responsibility to give back to the society that had made them fabulously rich. They saw the estate tax, in effect, as the ultimate clawback.
In future years, the estate tax would do some serious clawing. Between 1941 and 1976, the estates of the rich faced a tax rate of 77 percent on wealth over $10 million. In 1980, the top estate tax stood at 70 percent on wealth over $5 million.
Estate tax levies have been falling ever since. In 2010, thanks to the Bush tax cuts enacted in 2001, we had no estate tax at all.
Since then, thanks to a late 2010 deal between the White House and GOP leaders in Congress, we've had an exceedingly weak estate tax. Couples have had all wealth under $10 million totally exempt from any estate tax, and no estate with a value over $10 million has faced a tax rate higher than 35 percent.
If the current Congress does nothing on the estate tax over the rest of this year, the pre-Bush estate tax of 2000 — with a 55 percent top rate — would go back into effect as of January 1, 2013. Lobbyists for America’s most comfortable are, predictably, working hard to prevent that eventuality.
To help in that effort, Republican lawmakers are seeking to make the 2010 estate tax deal permanent. Top Democrats in Congress and the White House want to revert back to 2009’s 45 percent top rate. But the Democratic congressional leadership hasn’t been able to round up enough Democratic votes to move forward on even this mildest of stabs at significant estate taxation.
How mild? In real life, a 45 percent top estate tax rate translates, after exemptions and deductions, into not much of a burden on the super rich.
In 2007, for instance, the top estate tax ran 45 percent. In that year, 1,192 wealthy Americans died and left behind estates worth at least $20 million. These estates held a combined $75 billion. But after exemptions and deductions, only $10.2 billion of that $75 billion, 14 percent, went to federal estate tax.
Two years ago, three U.S. senators introduced legislation that would, if enacted, subject net estate wealth over $50 million to a 55 percent top tax rate, with a surtax of an additional 10 percentage points on wealth over $500 million.
Estate tax rates at that level might do some serious clawing. And claw we must.
“The man of great wealth owes a particular obligation to the state,” the great Republican estate tax champion Teddy Roosevelt noted a century ago, "because he derives special advantages from the mere existence of government.”
Wealthy Americans today aren't meeting that obligation, not even coming close.
The super rich hold trillions of dollars in offshore tax havens, but congress won't tax them, which is the only way we can ever claw this money back from the evil hoarders who think they never think have enough. Ask Mitt Romney if he has enough.
The extremely rich in this country have had especially low tax rates (on capital gains) since 1921, they have Social Security taxes capped on any "regular" wages they might earn, and they pay NO Social Security or Medicare taxes at all on their capital gains.
And when they break the law with tax evasion (and by all other means), the super-wealthy rarely go to jail.
People like Mitt Romney gave been getting away with tax evasion for years ($100 million in an IRA account), renouncing their citizenship to avoid taxes, and extracting wealth from the American citizens for years...and Republicans are to blame for eliminating IRS tax auditors in budget cuts.
Senator Harry Reid double-triple-downed on his claim about Mitt Romney not paying taxes for ten years. "So, the word's out that he hasn't paid any taxes for 10 years. Let him prove that he has paid taxes, because he hasn't," he said on the Senate floor. "We already know from one partial tax return that he gave us, he has money hidden in Bermuda, the Cayman Islands and a Swiss banking account. Mitt Romney makes more money in a single day than the average middle-class family makes in two years or more."
(Google: Bud Meyers tax evasion)
* As an aside: George W. Bush initiated a deal to fund a company making clean energy solar panels , and the Obama administration went through with the deal which resulted in the company going bankrupt two years ago, costing the taxpayers $500 million. Fox News and the Republicans have been beating the drum on that deal ever since then, but they don't complain at at about the billions of dollars that the taxpayers literally give away for nothing to the biggest oil companies, year after year after year.